Author Michael Lewis on the Greek Tragicomedy
I was on Power Lunch recently with Michael Lewis, author of "Boomerang" and many other books. "Boomerang" is a series of essays on the problems that Iceland, Ireland and others have had due to the global debt crisis. I spent the weekend reading the book, and there is a very amusing chapter on a visit he made to Greece a short while ago. Excerpts below.
On the true debt of Greece: "In addition to its roughly $400 billion (and growing) of outstanding government debt, the Greek number cruncher had just figured out that their government owed another $800 billion or more in pensions. Add it all up and you got about $1.2 trillion, or more than a quarter-million dollars for every working Greek….And those were just the official numbers; the truth is surely worse."
On the absurd wages paid in the government sector: "In just the past twelve years the wage bill of the Greek public sector has doubled, in real terms — and that number doesn't take into account the bribes collected by public officials. The average government job pays almost three time the average private-sector job." ?
On the comical inefficiencies of the public sector: "The national railroad has annual revenues of 100 milion euros against an annual wage bill of 400 million, plus 300 million euros in other expenses…Twenty years ago a successful businessman turned minister of finance named Stefanos Manos pointed out that it would be cheaper to put all Greece's rail passengers into taxicabs: it's still true."
On who caused the debt crisis in Greece: "The biggest problem the banks had was that they had lent roughly 30 billion euros to the Greek government--where it was stolen or squandered. In Greece the banks didn't sink the country. The country sank the banks."
On the banality of tax cheating: "The scale of Greek tax cheating was at least as incredible as its scope: an estimated two-thirds of Greek doctors reported incomes under 12,000 euros a year — which meant, because incomes below that amount weren't taxable, that even plastic surgeons making millions a year paid no tax at all….'If the law was enforced," the tax collector said, "every doctor in Greece would be in jail.'"
"One reason no one is ever prosecuted — apart from the fact that prosecution would seem arbitrary, as everyone is doing it — is that the Greek courts take up to fifteen years to resolve tax cases…Somewhere between 30 and 40 percent of the activity in the Greek economy that might be subject to income tax goes unrecorded…"
On the supposed deception the Greeks used to get into the euro zone in 2001:
"In particular they needed to show budget deficits under 3 percent of their gross domestic product, and inflation running at roughly German levels. In 2000, after a flurry of statistical manipulation, Greece hit the targets. To lower the budget deficit the Greek government moved all sorts of expenses (pensions, defense expenditures) off the books. To lower Greek inflation the government did things like freeze prices for electricity and water and other government-supplied goods, and cut taxes on gas, alcohol, and tobacco. Greek government statisticians did things like remove (high-priced) tomatoes from the consumer price index on the day inflation was measured."
"In 2001, Greece entered the European Monetary Union, swapped the drachma for the euro, and acquired for its debt an implicit European (read German) guarantee. Greeks could now borrow long-term funds at roughly the same rate as Germans — not 18 percent but 5 percent."
"Here, in 2001, entered Goldman Sachs, which engaged in a series of apparently legal but nonetheless repellent deals designed to hide the Greek government's true level of indebtedness…The investment bankers also taught the Greek government officials how to securitize future receipts from the national lottery, highway tolls, airport landing fees, and even funds granted to the country by the European Union. Any future stream of income that could be identified was sold for cash up front and spent."
On witnessing a general strike to protest raising the retirement age: "Thousands upon thousand of government employees take to the streets to protest the bill. Here is Greece's version of the Tea Party: tax collectors on the take, public-school teachers who don't really teach, well-paid employees of bankrupt state railroads whose trains never run on time, state hospital workers bribed to buy overpriced supplies."
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